23 November 2016 by lberuti
The US never really showed up today, and, in Europe, players felt reluctant to go long risk before Thanksgiving into the liquidity vacuum which is expected until Monday. There was therefore little resistance when iTraxx Main (ITXEB) went from 79bps to 82bps. The referendum on constitutional reforms in Italy is drawing ever closer – it will be held on December 4th – and this time polls are forecasting an upset that would see the “No” coming on top. If they are correct, the deputy-secretary of Mr Renzi’s Democratic Party confirmed that they would seek early elections by the summer 2017, without saying whether Mr Renzi would stay on to lead the party. That certainly contributed to the weakness in peripheral names, particularly the banking sector which was not helped by a story run in the Italian press that the ECB has found BPIM’s loan book to be under covered with regard to certain exposures to the tune of 1 to 2 billion euros. It made ITXEB the underperformer of the day once again, as it looks stuck at the top of its recent range. The gap between ITXEB and its US equivalent, CDX Investment Grade, is the widest we have seen since Brexit. It stands at 8bps, with CDXIG closing at 74bps.